Halliburton Offshore Services Inc. vs Deputy Director of Income Tax and Others

B.S. Verma, J.

Stay Application No. 10973 of 2010

Heard learned Counsel for the parties and perused the record.

By means of this writ petition, the Petitioner has sought a writ in the nature of certiorari quashing the notice dated 31-3-2010 (Annexure-2) issued by Respondent No. 1 u/s 147/148 of the Income Tax Act (for short the Act) and the order dated 7-12-2010 (Annexure-6) dismissing the objections of the Petitioner. Petitioner has further sought a writ of mandamus directing the Respondents to drop all subsequent assessment proceedings for the assessment year 2005-06.

According to the Petitioner, the Petitioner company is engaged in the business of providing services and facilities in connection with exploration and extraction of and production of mineral oils. The Petitioner company filed original return of income for the assessment year 2005-06 on 12-5-2006 declaring total income of Rs. 3,96,49,496/- under the normal provisions of the Act offering its gross revenue for tax u/s 44BB of the Act. The Assessing Officer issued notice u/s 143(2) of the Act and initiated assessment proceeding proceedings. The Petitioner filed written submissions and furnished details/information during the assessment proceedings. The assessing officer ultimately passed by the assessment order dated 29-1-2007 u/s 143(3) of the Act, which has been annexed as Annexure-2.

Subsequently, the Respondent No. 1 issued notice dated 31-3-2010 u/s 148 of the Act proposing to reassess the income of the Petitioner alleging the same to be escaped assessment. The Petitioner again filed the original return as was filed for the assessment year 2005-06 and requested the Respondent No. 1 to furnish reasons recorded for re-opening the assessment. According to the Petitioner the reasons were based on a Division Bench judgment rendered by this Court in Income Tax Appeal No. 239 of 2001 Commissioner of Income Tax and Anr. v. O.N.G.C (2008) 229 ITR 438 (Uttaranchal) wherein the nature of service has been held fee for technical services.

Learned Counsel for the Petitioner Mr. P.R. Mullick has vehemently contended that the impugned notice u/s 148 of the Act has been issued to the Petitioner pertaining to assessment year 2005-06 in respect of the same income as declared by the Petitioner in the original assessment proceedings and no other income is chargeable as escaped assessment, therefore, the matter falls within the ambit of Proviso first appended to Section 147 of the Act.

Learned Counsel for the Petitioner further contended that it is a case of change of opinion in respect of the same income which was subject matter of earlier assessment order passed u/s 143(3) of the Act and that change of opinion is not permissible in view of a Division Bench judgment rendered by Delhi High Court in the case of D.T. and T.D.C. Ltd. v. ACIT decided on 25-1-2010 [324 ITR 234] wherein in paragraph 10 the following observations have been made:

The position that a mere change of opinion would not entitle an Assessing Officer to reopen a completed assessment is well settled. The latest decision being of the Supreme Court in Civil Appeal No. 2009-2011 of 2003 and Civil Appeal No. 2520 of 2008 decided on 18th January, 2010 which approves this Court''s Full Bench decision in the case of Commissioner of Income Tax v. Kelvinator of India Limited:256 ITR 1. The power of re-assessment is different from the power of review. The Assessing Officer has been given the power to re-assess u/s 147 upon certain conditions being satisfied. The Assessing Officer does not have the power of review. If a change of opinion were to be permitted as a ground for re-assessment then it would amount to granting a licence to the Assessing Officer to ''review'' his decisions, which power he does not have.

In reply, learned Counsel for the revenue Mr. Arvind Vashist Advocate has vehemently urged that the assessing officer is fully competent to assess or reassess such income, other than the income involving matters which are the subject-matter of any appeal, reference or revision, which is chargeable to tax and has escaped assessment as per Proviso second appended to Section 147 of the Act and the case at hand comes within the ambit of explanation 2 (c) appended to Section 147 of the Act, which reads as under:

(c) where an assessment has been made, but-(i) income chargeable to tax has been underassessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed.

Learned Counsel has therefore contended that where the income is escaped assessment, there is no bar of a period of four years and, the assessing authority has jurisdiction to issue notice u/s 148 of the Act.

Relevant extract of Section 147 of the Act reads as under:

Income escaping assessment.-If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 - 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in Sections 148 - 153 referred to as the relevant assessment year).

Provided that where an assessment under Sub-section (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the Assessee to make a return u/s 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year.

Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject-matter of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.

I have perused the judgment rendered by the Division Bench of Delhi High Court in the case of D.T. and T.D.C. Ltd. v. ACIT (supra) decided on 25-1-2010,wherein it has been held that reopening of the completed assessments amounted to a mere change of opinion, which is not permissible as per the settled principles.

I have also gone through judgment rendered by a Division Bench of this Court in the case of Commissioner of Income Tax and Anr. v. O.N.G.C. (supra). This judgment is not on the issue of change of opinion. The Division Bench has considered the recitals and various clauses of the contract of agreement between the parties and on that ground, it has been held that the services are technical in nature.

Prima facie the question whether the services rendered by the Petitioner is a technical service or not, it requires scrutiny in the matter by the Court, therefore, as an interim measure it is directed that till the next date of listing, the assessment proceedings may go on but no final order shall be passed in the assessment proceedings by assessing officer. (Stay Application stands disposed of).

Learned Counsel for the Respondent prays for and is allowed four weeks'' time to file counter affidavit. List thereafter for admission/orders.

A certified copy of this order be issued to the learned Counsel for the parties by 30-12-2010 on payment of usual charges.